October 12, 2017 – The Producer Price Index (PPI) looks at the average change in selling prices from the viewpoint of domestic producers of both goods and services. Three areas of production are observed: industry-based, commodity-based and commodity-based final demand-intermediate demand.
The Producer Price Index (Final Demand) increased 0.4% in September, right in line with expectations. The PPI is now up 2.6% year-over-year, while Core PPI, which excludes food and energy, is up 2.2% year-over-year. Core PPI also increased 0.4% in September, above expectations of 0.2% growth. Trade services were up 0.8% along with transportation and warehousing experiencing a 1.0% increase this month.
September’s PPI report is impacted by the hurricanes that hit the southern states. The energy portion reflecting significant change of 3.4%. The hurricanes forced oil rigs and refineries to shut down production leading to the increase in energy prices. Despite the tropical storms affecting the energy component, PPI remains fairly consistent over the past year without extremely volatile movements. Looking at Core PPI provides a better indication of inflation expectations. Taking out food and energy, PPI presents a 2.2% increase over last year leading to a normal level of inflation.